Cost Plus Contract Template for New Zealand
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What is a Cost Plus Contract?
The Cost Plus Contract is designed for situations where the final scope or costs of work cannot be accurately predetermined at the contract's outset. This contract type, governed by New Zealand law, is commonly used in complex projects, renovation works, emergency repairs, or situations where flexibility in scope is required. It provides a framework for transparent cost recovery plus a predetermined profit margin, while including mechanisms for cost verification, reporting, and audit rights. The document incorporates provisions compliant with New Zealand legislation, including the Contract and Commercial Law Act 2017 and the Fair Trading Act 1986, and addresses GST requirements under the Goods and Services Tax Act 1985. This contract type is particularly valuable when rapid mobilization is required or when the scope of work may evolve significantly during execution.
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About the Cost Plus Contract
A cost plus contract provides a flexible pricing structure where you pay the contractor for actual project costs plus an agreed fee or percentage for profit and overhead. This arrangement is particularly useful when you cannot accurately estimate the full scope or cost of work at the project's outset, offering transparency in cost recovery while protecting both parties' interests.
When do you need this document?
You need a cost plus contract when undertaking projects with uncertain scope or complexity. This includes renovation of heritage buildings where hidden structural issues may emerge, emergency repair work requiring immediate mobilization, research and development projects with evolving specifications, or construction work in challenging environments where unforeseen conditions are likely. The contract is also valuable for specialist work where the extent of services cannot be predetermined, such as environmental remediation, complex engineering projects, or situations where design changes are anticipated during execution.
Key legal considerations
Your cost plus contract must clearly define what constitutes reimbursable costs and excluded expenses to avoid disputes. Establish robust record-keeping requirements, including detailed documentation for all costs, receipts, timesheets, and supporting evidence. Include provisions for cost verification and audit rights, allowing you to review contractor records and validate expenses. Define the fee structure clearly, whether it's a fixed fee, percentage of costs, or combination approach. Address change management procedures, specifying how variations to scope will be handled and approved. Consider implementing cost caps or budget limits to maintain project control, and ensure the contract addresses GST treatment of costs and fees to comply with tax obligations.
Legal requirements in New Zealand
Under the Contract and Commercial Law Act 2017, your cost plus contract must meet standard contract formation requirements including clear offer, acceptance, and consideration. The Fair Trading Act 1986 requires that all cost representations be accurate and not misleading, making detailed record-keeping essential. For construction projects, the Construction Contracts Act 2002 governs payment provisions, requiring progress payments and dispute resolution procedures. GST obligations under the Goods and Services Tax Act 1985 must be clearly addressed, particularly regarding the treatment of reimbursable costs and fee components. If contracting with consumers, the Consumer Guarantees Act 1993 may apply, providing additional protections. Ensure your contract includes proper dispute resolution clauses and complies with electronic transaction requirements if using digital signatures or communications.
GOVERNING LAW
Applicable law
This Cost Plus Contract is drafted to comply with New Zealand law. Key legislation includes:
Construction Contracts Act 2002: Regulates payment provisions and dispute resolution in construction contracts, particularly relevant for cost-plus arrangements in construction projects
Fair Trading Act 1986: Ensures fair trading practices and prohibits misleading conduct in trade, including pricing and cost representations
Goods and Services Tax Act 1985: Governs GST obligations which are particularly relevant in cost-plus contracts where costs need to be clearly identified and tracked
Consumer Guarantees Act 1993: Applies if the contract is with a consumer, providing statutory guarantees for services and workmanship
Health and Safety at Work Act 2015: Relevant for contracts involving workplace activities, ensuring costs related to health and safety compliance are properly addressed
Building Act 2004: If the contract relates to construction, this Act governs building work and compliance requirements that may affect costs
Privacy Act 2020: Relevant for handling personal information in the contract and maintaining confidentiality of cost information
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